Final Results for 12 months to 30 June 2016

"A transformational year and a considerable opportunity in secure payment solutions"

PCI-PAL (AIM: PCIP), the customer engagement specialist focussed on secure payment solutions, announces its Final Results for the 12 months ended 30 June 2016 reflecting a period largely accounted for by now discontinued operations following the sale of the call centre focussed operations, Ansaback and CallScripter post period-end.

Financial Highlights:

• Group turnover climbed 27% to £8,265,955 (2015: £6,486,941).
• Group returned to profitability, with profit before taxation on continuing activities of £21,163 (2015: loss of £258,244).
• Closing cash and cash equivalents balance of £895,422 (2015: £1,040,822).

Operational Highlights:

• Major wins for PCI-PAL which included a major pan-European fitness chain, a market leader in the European gambling sector, a leading national online estate agency, a global retail fashion brand, and a regional public sector authority.
• PCI-PAL transaction volumes rose by 46% in the six months to June 2016.
• Ansaback increased overall sales by 36.3% on the previous year, while CallScripter had a difficult trading year resulting in a loss of £229,631.

Post year end transaction and re-organisation

Summary Highlights:

•  Disposed of the Ansaback call centre and CallScripter businesses to an industry consolidator.
• £3.35 million up front cash consideration paid on completion with the balance of £3.35 million received in the form of Loan Notes, to be redeemed over 42 months, post completion.
• Sale and leaseback of the Group's property generating further net cash to the Group of c. £0.8 million.
• £4.8 million net cash position (including existing Group resources) at completion.
• Special interim dividend of £1 million, as announced on 7 November 2016, to be paid to shareholders on the register as at 18 November 2016.
• Renamed the PLC to reflect the new focus of the business, as a specialist provider of secure payments solutions, including a cloud-based, PCI DSS⁽¹⁾ compliant suite.
• Recent contract wins and growing transaction volumes across multiple verticals highlight the significant market opportunity in the market for secure payments solutions and data security.

(1)  The Payment Card Industry Data Security Standard or PCI DSS has been developed globally by the major payment card schemes

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

Commenting on the results and prospects, William Catchpole, CEO said:

"The recent disposal marks the beginning of our next phase of growth and this is a very exciting time for the business.  The opportunities to grow our secure payments operations are without doubt considerable.  We have an excellent team in place, cash resources to pursue our strategy and look forward to providing updates on our progress in due course."

Annual Report and Accounts - Copies of this announcement can be downloaded from the Company's website (www.ipplusplc.com).  Copies of the Annual Report and Accounts (in addition to the notice of the Annual General Meeting) will be sent to shareholders by 24 November 2016 for approval at the Annual General Meeting to be held on 16 December 2016, and are also being made available today on the Company's website.

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About PCI-PAL PLC:

PCI-PAL provides products and services that enable organisations to take customer payments securely, to store customer data safely, in particular payment card data, and to de-risk their business activities from the threat of data loss and cybercrime. 

PCI-PAL allows companies to achieve compliance with the Payment Card Industry Data Security Standard ("PCI DSS") without the need to invest in or maintain their own infrastructure.  PCI DSS is a standard developed by the major payment card schemes globally, and is a requirement for all companies handling card payments from customers.  PCI-PAL has an established history in contact centres, software and telephony, with its management team having previously grown businesses successfully in both the outsourcing and desktop software space. 

PCI-PAL's solutions include the 'PCI-PAL Agent Assist' tool and the 'PCI-PAL Automate' service, which are both secure payment solutions for contact centres to process customer credit card details securely and in adherence with PCI DSS.  'PCI-PAL Call Record' enables call recordings to be retrieved within one second of call completion, and call archiving and retrieval via secure web access.

In addition to contact centre payments and data security, PCI-PAL also provides additional cloud communications services including bespoke interactive voice response, multi-lingual automation, international numbering, media response tracking and associated cloud contact centre services.

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 30 JUNE 2016

I take pleasure in presenting my statement in respect of the year ended 30 June 2016 which includes a review of the considerable changes to the Group since the period end.

Operational Highlights

There is much to report since my previous statement to the market on 26th August 2016 in respect of last year. The Board is pleased to report that the Group ceased to be loss-making last year, and that, since the year-end, we have completed the disposal of the Ansaback call centre business and the CallScripter software business, so focusing all of our efforts on our rapidly developing PCI-PAL secure payment business; PCI being the recognised market acronym for Payment Card Industry.

Reflecting this change, we renamed the holding company PCI-PAL PLC on 3 October 2016.

Financial Summary

In the year ended 30 June 2016 the Group generated a profit on continuing activities before tax of £21,163 (2015: loss of £258,244), on turnover up 27% at £8,265,955 (2015: £6,486,941). Cash and cash equivalents at 30 June were £895,422 (2015: £1,040,822).

The trends in the business over the period reflected the positive changes that were being made in the Group ahead of the decision to pursue our current strategy of focussing solely on the development of the PCI-PAL business.

Review of Operations

PCI-PAL had an excellent year, securing 32 new contracts across a range of market sectors including retail, services, leisure, public, and charity sector.  Transaction volumes for the month of June 2016 were 84% higher compared to June 2015.   The continued evolution of the PCI-PAL product suite to provide a wide range of payment security solutions for businesses has allowed us to broaden and extend the value proposition to both existing clients and new business prospects. We maintain a high retention of existing clients, retaining all payments clients for the period.

Significant client wins last year included a global leader in the logistics market, a major pan-European fitness chain, a market leader in the European gaming sector, and a global retail fashion brand. PCI-PAL typically benefits from a high proportion of contracted, recurring revenue. In the 2015/2016 financial year, the business demonstrated its ability to grow this revenue and it is the view of the Board that further investment would allow us to accelerate this growth.

Ansaback had a strong year delivering growth in revenue of 36.3% on the previous year, however much of this was generated from its new significant customer, which represented a major risk for a group of our size.

CallScripter, despite the best endeavours of management and its staff, struggled to secure sufficient new contracts and again generated losses.

Against this background the Group resolved to sell the Ansaback and CallScripter businesses to Direct Response Contact Centres Group Limited, as announced following the year-end on 12 September 2016.

Following this disposal, the Group will now focus all of its efforts and working capital on developing the exciting momentum PCI-PAL achieved last year.

Dividend

The proceeds from the sale will also allow us to return £1 million to shareholders by way of a special interim dividend. In light of the special interim dividend and the results for the year ended 30 June 2016, the Board is not proposing a final dividend in respect of the year to 30 June 2016.

People

Again I would like to thank each of the Directors and employees for all their efforts during the past year. We said goodbye to Stuart Gordon, who stood down as Chief Financial Officer following the disposal, and his team; Christian Pawsey and his staff at Ansaback; and Kevin Ellis and his staff at CallScripter. We thank each of them for all their efforts on behalf of the Group and wish them every success in the future.

At the same time, we have welcomed to the Board James Barham, who has been responsible for PCI-PAL operations to date, as Commercial Director, and Andy Francombe as Chief Financial Officer, on a part-time basis.

Current trading and outlook

I am pleased to report that PCI-PAL has continued to make strong progress since the year-end, securing 12 new contracts for the provision of secure payment services, with client highlights including a major utilities company and a global furniture retailer.  In addition, we continue to grow our channel business with the agreement of two partner arrangements with global leaders in the business communications and IP Telephony space. Monthly transaction volumes have increased 22% over the four months since year end.

We have strengthened our operations team which is now more capable than ever to deliver projects successfully. Improved delivery is, in turn, expected to shorten the time period between contract signature and commencement of recurring and service usage revenues at service 'go live'.

Our focus on PCI-PAL reflects our ambitious expansion plans for this business. We are targeting substantial growth in both gross revenue and new customer wins, both this year and next, with the objective that PCI-PAL PLC will deliver an inaugural monthly profit in the next financial year. Although we intend to invest meaningful sums to grow this business, our plans are predicated on the Group's existing resources together with the proceeds of the redemption of the Loan Notes received from the recent disposal.

The Board is pleased with the progress to date and is confident that the Group's long term strategy is appropriate.  We believe that PCI-PAL's positioning within the 'Fintech' (Financial Technology) space provides exciting growth prospects.

We look forward to reporting to shareholders on our progress in developing this business.

Chris Fielding

Non-Executive Chairman

STRATEGIC REPORT

FOR THE YEAR ENDED 30 JUNE 2016

Business Summary

Subsequent to the disposal of the Ansaback call centre business and CallScripter software division, PCI-PAL PLC now operates solely in the PCI and telephony space. The operating company is the fully-owned subsidiary, PCI-PAL (U.K.) Limited (formerly PCI-PAL Limited).

Ansaback Division

The Ansaback call centre is a 24 hours a day, 7 days a week bureau telephony service providing out of hours call handling, emergency cover, dedicated phone resources, non-geographic, low call and Freephone telephone facilities as well as disaster recovery lines and other telecommunication services. Ansaback increased overall sales by 36.3% on the previous year. Dedicated advisor services have shown the largest increase, with the bureau also showing an increase in sales revenue of 12.3% year-on-year and the smaller outbound department increasing by 74.4%.

The Ansaback division's results also incorporate the results of PCI-PAL (formerly IP3 Telecom), which was included within the division prior to the year end.

PCI-PAL

PCI-PAL provides products and services that enable organisations to securely take customer payments, safely store customer data, in particular credit card data, and to de-risk their business activities from the threat of data loss and cybercrime.  PCI-PAL is a cloud based solution suite.

The focus in the year for the PCI-PAL and telephony division has been on expanding the PCI-PAL secure payments business.  Our expertise in contact centre, and industry relevant telephony, security, and compliance requirements, mean we are well placed to continue to grow our share of an expanding and highly topical market.

PCI-PAL, including its telephony business, had a strong year expanding its client base extensively in the phone payment market, with extensive contract wins through the provision of its agent-assisted and automated payment products, while also seeing growth in supplementary data security and PCI related products and services.  The client base continues to consist of blue chip, well-known European and, increasingly, global brands, representing organisations with a high risk of reputation loss in the event of data breach.  Recurring revenues have grown 75% year on year, with an additional pipeline of contracted business yet to go live. We maintain a position as one of Europe's leading providers of contact centre payment security solutions; but with this comes increasing interest in our product set from outside of this local region, and this is something we expect to develop on in the coming financial year.

Cyber security and data protection remain high on boardroom agendas, and with the market fuelled by well publicised data breaches across multiple vertical industries, more and more companies are looking to find cost effective, outsourced technical solutions to protect customer data and de-risk their businesses from the threat of data loss.  We anticipate this focus will continue for years to come, and we are well placed with a strong client reference base and product set with which to capitalise on the opportunity.

CallSripter Division

CallScripter is an enhanced customer interaction software suite specifically developed for contact centres, telesales and telemarketing operations. Clients gain major benefits by introducing CallScripter's dynamic scripting environment and advanced reporting software into their organisations. The software facilitates the rapid set-up, handling and reporting of sophisticated inbound calls, outbound calls and e-mail campaigns.

The division had a difficult trading year resulting in a loss of £229,631 from a turnover of £637,334. Two main factors contributed: First, being a shift in focus from traditional capex purchasing to cloud models by both a major partner and the market in general resulting in significantly less upfront fees from Outright Purchase sales. Second, being a number of external forces resulting in potential customers delaying, or cancelling entirely, their purchase decisions.

Risks

Principal business risks and uncertainties

The PCI-PAL business has a limited operating history and, as at the date of this document, the Company has no distinct financial statements and/or no meaningful historical financial data upon which prospective investors may base an evaluation of the Continuing Group. The Company is therefore subject to all of the risks and uncertainties associated with any new business enterprise including the risk that the Company will not achieve its investment objectives and that the value of an investment in the Company could decline and may result in the total loss of all capital invested.

There can be no assurances that the Group will successfully develop or that the resources it has will be suitable for its requirements. The Group may require the injection of further capital at a level which the Company or any third party may consider that it is unable to meet.

The principal risks facing the Group and its continuing operations relate broadly to data security, business continuity plans, its intellectual property, its technology, the market place and competitive environment, and dependence on key people.

Intellectual property rights ('IPR'): The Group is reliant on IPR surrounding its internally generated and licensed-in software. Whilst it relies upon IPR protections including patents, copyrights, trademarks and contractual provisions it may be possible for third parties to obtain and use the Group's intellectual property without its authorisation. Third parties may also challenge the validity and/or enforceability of the Group's IPR, although the Directors do not envisage this risk to be significant. In addition, the Directors are aware of the risk of losing key partners.

Data security and business continuity pose inherent risks for the Group. The Group invests in and keeps under review formal data security and business continuity policies which are independently audited.

Market place and competition: The sector in which the Group operates in and/or routes to market may undergo rapid and unexpected changes or not develop at a pace in line with the Directors' expectations. It is also possible that competitors will develop similar products; the Group's technology may become obsolete or less effective; or that consumers use alternative channels of communications, which may reduce demand for the Group's products and services. In addition, the Group's success depends upon its ability to develop new, and enhance existing products, on a timely and cost effective basis, that meet changing customer requirements and incorporate technological advancements. The Directors review the market movements, client requirements and competitive suppliers to ensure that the current portfolio is as required.

The Directors ensure that the team are properly directed, trained and motivated to address this issue.

Key personnel: The Group depends on the services of its small team of key technical, operations, sales and management personnel. The loss of the services of any one or more of these persons could have a material adverse effect on the Group's business. The Group maintains an active policy to identify, hire, train, motivate and retain highly skilled personnel in key functions.

Key performance indicators

The Company monitors a number of key performance indicators, using both financial and non-financial metrics, on a daily and monthly basis. The most important of these are as follows:

• Cash on a daily basis
• Sales and results against budget on a monthly basis
• Sales pipeline on a monthly basis

Employee Relations and Social Responsibilities

The Company continues to advocate a healthy staff policy via its participation in Investors in People together with pursuing a Health and Well-being policy for encouraging healthy practices. The Company continues to encourage car sharing, bus usage and the cycle to work initiative.

The Company employees support a designated charity each year and raised £3,205.

Summary and Outlook

The recent disposal marks the beginning of our next phase of growth and this is a very exciting time for the business.  The opportunities to grow our secure payments operations are without doubt considerable.  We have an excellent team in place and cash resources to pursue our strategy and look forward to providing updates on our progress in due course.

By Order of The Board

William A Catchpole

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2016

The accompanying accounting policies and notes form an integral part of these financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2016

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2016

The accompanying accounting policies and notes form an integral part of these financial statements.

The Board of Directors approved and authorised the issue of the financial statements on 22 November 2016.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2016

CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)

FOR THE YEAR ENDED 30 JUNE 2016

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2016

The accompanying accounting policies and notes form an integral part of these financial statements.